Seoul, Oct 23 (IANS) South Korea’s economic growth hit the highest in over five years thanks to monetary and fiscal stimulus efforts as well as recovery in private consumption from the negative effect of the MERS outbreak.
According to the Bank of Korea data released on Friday, real gross domestic product (GDP) increased 1.2 percent in the third quarter from the previous quarter. From a year ago, the broadest measure of economic performance grew 2.6 percent, reported Xinhua.
The quarterly growth marked the highest since the second quarter of 2010 when the on-quarter GDP growth was 1.7 percent. It topped the BOK’s earlier forecast of 1.1 percent for the third quarter.
After falling below 1 percent in the first quarter of last year, the quarterly GDP growth kept the zero-percent rate for five straight quarters to the second quarter of this year when the figure dropped to 0.3 percent following the MERS outbreak.
Private consumption, which was hit hardest by the MERS outbreak in the second quarter, recovered from the fears of the infectious disease as no new MERS case has been reported since July.
“Domestic demand led the third-quarter growth. Private consumption recovered from contraction caused by the MERS,” Jeon Seung-Cheol, director general of the BOK’s economic statistics department, told a press conference.
Jeon attributed the rebound in consumer spending to the government measures to reinvigorate the economy, like a consumption tax cut and a fiscal stimulus package worth billions of US dollars including an extra budget plan.
The BOK cut its policy rate by a quarter percentage point in March and June each to a record low of 1.5 percent, helping boost the economy along with the fiscal stimulus measures.
The third-quarter rebound, however, was expected to be short-lived as exports, the main engine of the economy, slowed down amid the expected reduction in the positive effect from stimulus efforts.
Exports, which account for about half of the economy, reduced 0.2 percent in the third quarter from three months earlier after rising 0.3 percent in the second quarter.
The consumption tax cut is scheduled to end in the fourth quarter, and the implementation of the supplementary budget, including social overhead capital (SOC), would reduce in the fourth quarter.
The BOK revised down its 2015 growth outlook for the economy to 2.7 percent from 2.8 percent estimated three months earlier, meaning the fourth-quarter GDP growth would be 0.5 percent.